London’s FTSE 100 outperformed on Monday, as large-cap European stocks largely closed higher, despite some poor PMI readings at the start of the week.
After the data, eyes turn to central banks, with decisions from Federal Reserve, European Central Bank and Bank of Japan to come.
‘Central bankers might be hoping to channel Goldilocks when they deliver their rate hike decisions over the next couple of weeks. Getting that porridge just right by raising rates enough to cool inflation without totally starving the economy of the fuel it needs to keep firing is a tough ask. And with rates taking time for their effects to be truly felt by the economies in question, turning the dial one notch too high could mean what looks like stodgy goodness today becomes inedible goop in a month or two’s time,’ AJ Bell analyst Danni Hewson commented.
‘But how do you know when to stop turning? Today’s PMI data will definitely provide some food for thought for all those about to take their seats around the various central bank tables. Rising interest rates are altering spending habits and manufacturers are finding order books drying up as economies look more like wounded zombies than dynamic go-getters.’
Among individual shares in London, travel stocks got knocked for six, though Ocado surged on a favourable legal ruling.
The FTSE 100 index rose 14.86 points, or 0.2%, at 7,678.59. The FTSE 250 fell 55.47 points, or 0.3%, at 19,144.98, and the AIM All-Share lost 2.95 points, or 0.4%, at 763.60.
The Cboe UK 100 rose 0.3% to 766.64, the Cboe UK 250 fell 0.4% to 16,791.66, and the Cboe Small Companies rose 0.5% to 13,758.63.
In mainland Europe, the CAC 40 in Paris ended down 0.1%, while the DAX 40 in Frankfurt inched up 0.1%.
The pound was quoted at $1.2816 late Monday afternoon in London, down from $1.2852 at the London equities close on Friday. The euro stood at $1.1073, lower against $1.1121. Against the yen, the dollar was trading at JP¥141.27, down from JP¥141.64 late Friday.
Growth in the US private sector faded in July, data on Monday showed, with the service sector losing some steam.
The decline in the manufacturing sector eased, however.
S&P Global’s latest flash purchasing managers’ index reading fell to a five-month low of 52.0 points, from 53.2 in June. The figure moved closer to the 50.0 no change mark, suggesting growth has slowed.
The composite PMI is a weighted average of the services and manufacturing readings. The services PMI slipped to 52.4 points in July, from 54.4 in June. The manufacturing PMI rose to 49.0, from 46.3, a three-month-high.
S&P Global analyst Chris Williamson summed up July as a month of ‘slower economic growth, weaker job creation, gloomier business confidence and sticky inflation’.
The darkening picture adds downside risks to output growth in the coming months, which alongside in the slowing pace of expansion in July, will keep alive fear that the US economy may yet succumb to another downturn before the year is out,‘ Williamson added.
Numbers in the UK and euro area were underwhelming.
The headline seasonally adjusted S&P Global flash UK composite output index fell to 50.7 in July from 52.8 in June. Though remaining above the crucial 50.0 no-change mark which separates growth from contraction, July’s reading was the lowest since January.
The eurozone PMI fell to 48.9 points in July from 49.9 in June, suggesting the private sector’s slowdown deepened.
Confidence in the Chinese economy was also knocked. China’s top leaders said the country’s economy was facing ’new difficulties and challenges‘ in a meeting of the 24-person Politburo on Monday, state media reported.
‘The meeting pointed out that the current economic operation is facing new difficulties and challenges, mainly due to insufficient domestic demand, operational difficulties for some enterprises, high risks and hidden dangers in key areas, and a complex and severe external environment,’ a readout of the meeting on state broadcaster CCTV said.
China’s leaders meet annually at the end of July to review the country’s economic situation before their traditional summer break in August.
Weaker expectations for the Chinese economy sent luxury retail lower, ahead of a key week for the sector. London-listed Burberry fell 2.0%, while in Paris, Kering fell 1.5% and LVMH lost 1.1%.
LVMH Moet Hennessey Louis Vuitton reports earnings on Tuesday before Kering on Thursday.
Eyes will also be on European banks, with the likes of Santander, Deutsche Bank, Barclays and UniCredit among those reporting this week.
Stocks in New York were higher on Monday. The Dow Jones Industrial Average was up 0.6%, S&P 500 added 0.5% and the Nasdaq Composite rose 0.2%.
On Tuesday, Google owner Alphabet and computing firm Microsoft report earnings. Facebook and Instagram parent Meta Platforms reports on Wednesday.
In London, Ocado jumped 12%. The online supermarket is to be paid £200 million in a deal with Norwegian warehouse automation firm AutoStore, which accused it of breaching patents.
In a joint statement released on Saturday, Ocado and AutoStore said they have settled their long-running dispute over robot patents. A High Court judge ruled in March that AutoStore’s ‘patents were invalid’ and that, regardless, Ocado did not infringe them.
AutoStore is to pay Ocado £200 million in 24 monthly instalments starting in July 2023 under the new settlement.
A well-received update from Vodafone sent telecommunications stocks higher. Vodafone rose 3.9%, BT added 2.4% and Airtel Africa rose 1.0%.
Newbury, Berkshire-based Vodafone reported growth in organic service revenue, backed yearly guidance but said there is ‘much more still to do’ as far as its ‘action plan’ goes.
Vodafone said its service revenue for the three months that ended June 30 was €9.11 billion, down 4.2% from the €9.51 billion at the same point the year before. On an organic basis, however, it rose 3.7% on-year.
Total revenue in the first quarter was down 4.8% at €10.74 billion from €11.28 billion the prior year, but also up 3.7% organically.
Conversely, there was weakness in the travel sector. easyjet fell 4.4%, Tui lost 3.5% and Jet2 fell 4.3%, with the trio in the crosshairs of raging fires in Rhodes, Greece.
Tui confirmed that holidaymakers returned on ‘three dedicated flights’ overnight, with plans to bring more back ‘as soon as possible’ in place.
Jet2 said a repatriation flight carrying 95 passengers landed at Leeds Bradford Airport on Sunday evening before another four leave the island later on Monday.
Airline easyJet will operate two flights totalling 421 seats on Monday and a third on Tuesday, in addition to its nine scheduled flights to the Greek island.
S4 Capital slumped 21%, with its shares hitting a record low in earlier trade. It said revenue in the first half of 2023 was below budget, reflecting ‘challenging’ macroeconomic conditions and clients remaining ‘cautious’ and ‘very focussed on the short term’.
Consequently, S4 is now targeting full-year like-for-like net revenue growth in a range of 2% to 4%, as opposed to 6% to 10% previously, and operational Ebitda margin of 14.5% to 15.5%, as opposed to 15% to 16% previously.
‘The warning today will not come as a surprise, given its peers last week warned of the continued weakness in advertising spend within the tech sector,’ Peel Hunt analyst Jessica Pok commented.
Brent oil was quoted at $82.23 a barrel late Monday in London, up from $80.41 late Friday. Gold was quoted at $1,958.30 an ounce, lower against $1,960.17.
Tuesday’s economic calendar has a US consumer confidence reading at 1500 BST.
In the local corporate calendar, contract caterer Compass releases a trading statement and consumer goods company Unilever issues half-year results.
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